Overview of web marketing and promotion terms

There are a few terms in web advertising that crop up again and again. Now that you understand how web traffic is measured, you need to understand the way it is sold and packaged...

"CPM" is an abbreviation for "Cost per Thousand". Doesn't look much like an abbreviation, until we remember that M is the roman numeral for "thousand". Don't worry, it's just advertising types trying to show off. Anyway, the CPM rate is perhaps the most important concept in advertising, since so many banner ads are sold on a per-CPM basis.

That's all very well, but cost per thousand WHAT? Well, remember the overview of site traffic measurement? CPM usually refers to the cost per thousand impressions; that is the cost per thousand times your banner/text/audio/whatever ad is shown or circulated. Note that just because an ad is shown, it doesn't mean anyone is reading it!

Example: if a site has a CPM rate of $10, that means for $10 your advert will be shown 1,000 times. It may be shown to 1,000 different people, or it may be shown many times to a much smaller audience. A CPM rate does not imply "unique visitors".

Click-through Rate
The next important concept is the click-through rate. This is a measure of the effectiveness of an advertisement and is expressed as a percentage. The click-through rate refers to the percentage of people who "click through" an advertisement to visit the page it is linked to. (If you think of a banner ad as a kind of black hole in cyberspace then the click through rate is the percentage of space travellers who get sucked into the black hole and spat out somewhere across the Universe).

One person could generate many click-throughs by going back and forth through an advertisement (you'd think people had better things to do, but...) That's why most major ad server software has built-in mechanisms to track visitors so that only one click-through per visitor is registered within a given time-period (a few hours to a day)

Note that the click-through rate depends partly on the quality of the site, but FAR MORE on the quality of the offer being made by the advertiser (attractive banner, attractive offer, well-worded call to action, right price etc.) This is something many advertisers find difficult to understand/accept.

Cost per Click (CPC)
The cost per click is the amount you pay (or charge) per click-through of an advertisement. Many advertisers like buying ads on a CPC basis since they only pay for actual visitors. But as we saw in the table above, that's a twisted idea in reality since it is the advertisers themselves that dictate the click-through rate far more than the sites they advertise on. If you accept advertisers on a CPC basis, make sure you tell them you have the right to suggest "improvements" to their banner or other ad so that you can boost the click-through rate. If you purchase ads on a CPC basis, work with the site owner to improve click-through rates.

Click-away Rate
The click-away rate is essentially the same as the click-through rate but from a different angle. The click-away rate is the % of people who leave your site through a given link.

Run of Site (ROS)
Advertisements can be focused on a specific page or section of a site. A run of site (ROS) ad campaign simply means that the advertisement is rotated across all the pages of a site. You should always expect to pay less/charge less for a ROS campaign than for a targeted ad campaign.

Cost per Action (CPA)
An ad model has been rapidly gaining in popularity recently is the Cost per Action model. Instead of paying for a given number of impressions (CPM) or even for a given number of visitors (CPC) the CPA model rewards results. Affiliate and referral programs are examples of CPA programs.

For instance, Amazon.com will pay 5% of the value of all sales generated by a visitor coming from an affiliate site. As we will see later, the CPA model is open to a lot of abuse and has to be very carefully studied.

Armed with the terms above, you should be able to decipher the marketing fluff on nearly any website!

Next: Identifying different types of web advertising